2017 (5) TMI 1122 - HC - VAT and Sales Tax

Works contract - Whether the construction work of building done by the revisionist over its own land, falls under the definition of works contract on behalf of the prospective purchaser of the property? - Held that - an agreement was duly arrived at between the parties for carrying out construction activities and pursuant to such contract the developer had also received money, the existence of works contract is clearly established - Tribunal as well as the authorities were justified in treating the construction work undertaken to be works contract. Whether tax can be imposed u/s 3 F of the U.P. Trade Tax Act, on the goods purchased from outside the State of U.P., specifically for the purpose of being used in the construction of building for which risk and reward passed on the purchaser on execution of sale deed? - Held that - There does not seem to be much clarity on facts in the order of the Tribunal on such aspects. Whether, the addition of 20% profits made in the purchase value of goods purchased for being used in the construction activity is based on surmises and conjectures and, therefore, not sustainable in the eyes of law? - Held that - Learned Standing Counsel seems to be right in contending that proper factual premise do not appear to have been laid by the assessee in that regard. Matter on remand for consideration of these two aspects - appeal allowed by way of remand.

Summary

Issues:
1. Whether the construction work done by the revisionist over its own land falls under the definition of works contract.
2. Whether tax can be imposed under Section 3 F of the U.P. Trade Tax Act on goods purchased from outside the State for construction work.
3. Whether the addition of 20% profits in the purchase value of goods used in construction is justified.

Analysis:

Issue 1:
The applicant argued that there was no works contract as they owned the land and raised constructions without executing a transfer deed. However, the Standing Counsel contended that the law laid down by the Apex Court established the necessary ingredients for a works contract. The judgment highlighted that a works contract includes construction activities for valuable consideration, even if the owner of the property enters into an agreement for construction. The court emphasized that as long as the construction is for and on behalf of the purchaser, it constitutes a works contract. Since an agreement was in place for construction activities and money was received, the existence of a works contract was upheld by the court.

Issue 2:
The court noted a lack of clarity on whether purchases from outside the State were exclusively for the construction work. The Tribunal's order did not provide sufficient factual details on this aspect. The issue of additional profit, as raised in the third question, was deemed to be based on the assessment of facts related to the second question. The court decided to remit the matter back to the Tribunal for a fresh examination of these aspects in accordance with the law. The revisionist was given the opportunity to clarify the factual aspects, and both the second and third questions were remitted for fresh consideration by the Tribunal.

In conclusion, the revision was disposed of with the first issue resolved in favor of treating the construction work as a works contract. The second and third issues were remitted for further examination by the Tribunal to clarify the factual aspects related to purchases from outside the State and the addition of profits in the purchase value of goods used in construction.